Africa and Nigeria in particular is a great real estate destination but investment in its large expanse of land is encumbered a great deal by many factors. At the recent Property Investment (PRINVEST) Conference hosted by BusinessDay, experts including Obinna Onunkwo, chief operating officer at Purple, and Grace Ofure, chief executive officer of Lifecard International, offered insights into investing and unlocking values in Nigeria’s real estate, reports CHUKA UROKO.
A group of major real estate practitioners have given recipes for investing in property development and bridging the gap in residential and commercial housing in Nigeria. Essentially, they advocated for investment boost and collaboration to increase residential housing and commercial development in the country.
The operators, who are big ticket property investors, spoke at the recent Property Investment Conference (PRINVEST 2022) organised by BusinessDay in Lagos with the theme: ‘Dream Residential Communities, Closing the Gap.’ The conference was designed to proffer solutions that will address the housing deficit, highlight necessary reforms to develop infrastructure and provide solutions to mortgage insufficiency in Nigeria.
Leading the pack of experts at one of the event’s panel discussions, Co-founder and Deputy Chief Executive Officer, Purple, Obinna Onunkwo, spoke about how Purple had been able to navigate the terrain hitherto avoided by many in the industry.
He assured that if value is created in real estate development, an investor would make his money. Particularly, he revealed innovative concept that Purple adopted and one which worked for it. According to him, interested investors could adopt same and create wealth.
“There is money to be made; there is value to be created and that’s what drives us as a platform. When we did Maryland mall, our first major project, people thought we were crazy, because we said, you can’t be building destination location in Nigeria, you can do it in South Africa, you can do it in Mauritius but it’s a local one, we have traffic issues in Lagos, we have approval issues too.
So, you have to do something that fits the market, which is why we developed, for the first time in Nigeria, the concept of ‘small format retail’: when you build a mall, instead of spreading it across the ground, you stack it up and you put it in a location that is easier for people to access without traffic and stuff, and Maryland mall has been a huge success and we are replicating that across Lagos,” Onunkwo narrated.
“For us, we believe that there is a lot of money to develop real estate in the country but you have to address them one by one. About 2.3 percent of the entire portfolio of the pension fund asset is invested in real estate structure. That 2.3 percent is even below PENCOM guidelines; so it shows that there is a huge gap; the money is there.
But then, how do you create the product that gets the big funder to fund the big project that will do great significant ecosystem that creates jobs? Anytime we are building in any location, once we bulldoze and clear the site, the first person to resume at the site is the woman selling Akara, then the one selling Okpa and Ewedu; they line up, there will be breakfast, lunch, and dinner, boys will eat on site.
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Do you know how many people come to your site wearing white helmets and vests? Those are jobs! But if you did not create those significant opportunities, you can’t get that kind of job created, you cannot make the economy work.
The reason Lagos is working in comparison to other states is the large part of the real estate sector of Lagos and if you look across Nigeria, the parts of the country that are doing well economically are the parts of the country that have found ways to unlock value in real estate,” he added.
Addressing the challenges associated with real estate investments, Onunkwo highlighted the issues and the solutions to them.
“The biggest challenge in development in Africa is land survey. DR Congo is very big and even bigger than many countries; if you take the whole of Portugal up to Ukraine and squeeze it together, it will enter that country, but then you don’t have survey tracts of land, it’s huge. So if you can sort out the issues of survey, sort out issues of approval, sort out issues of conflict and dispute resolution, you will unlock the value.
We are sitting on land that can add value, some of us have land in the village, where are the title documents? Somebody can come tomorrow and say it’shis land; you will go and consult the ancestors, you will bring calabash, break kola nut and try to divine what’s going on, but you are losing value. But if you can find a way to turn that land into a securitized document, you can then go to the bank and take money because the bank will not lend you money against anything.
They have to lend you money against a document verified by the government that they can put in their books as part of their collateral, which goes to what is said in terms of the value of real estate increasing once the land has a title. So, if we can address those title issues, then we can expand significantly the opportunity to real estate.
So what we are doing as a company is taking it head-on, creating value for our shareholders by addressing those issues. And once you address those issues, you create significant value for everybody, and then next thing is that you now scale it up,” he noted.
Delving into how Purple is scaling up, the DCEO said, “in terms of scale, we are expanding; we have a new project called ‘Purple Lekki’ on Freedom Way, that we are currently building that would be ready by November; it’s a massive project.
“We are doing another one, lifestyle premium housing, behind that 10,000 square meters. We call it Purple Urban; we are doing another one next to Purple Maryland on 15-floors which we call ‘The Macro’.
We’ve entered into joint venture arrangements with foreign companies—international companies that want to come into Nigeria and are looking for local partners and we stated what we can do and what we can’t and we were able to unlock significant value with our local and international funding partners who are now seeing the track records.”
Looking forward, Onunkwo gave the assurance that, “the opportunity is there. There are various levels to do it.”
“Talking about co-investment, that is very important; you can do co-investment at the retail level; you can do it at the corporate level. At the corporate level you are not going to gather a bunch of young guys to do co-investment of billions of naira, you have to get corporates on board; it involves structuring, documentation, making sure every party is comfortable.
Once you work that structure, that template can be replicated, but we are not going to do it if we don’t have a local solution; so the reason we are getting on board and doing is that those local solutions are creating value for local customers. The likes of Jabi Lake Mall and co, before they were sold off, were all foreign investors,” he pointed out.
“Now imagine if you are in Nigeria, investing in Ivory Coast, by the time we want your money you will ask them to give you back your money in naira, right? When the money leaves the ecosystem, it is not helping us, we are among the first local guys in recent years to go into commercial development and all money stays locally and that value is created.
So yes the opportunities, the various ways to approach the problem, it is not a single, there is no silver bullet to it but, we will be taken one by one and you create a solution, that’s how you create an ecosystem, people can back it and you make money,” he added.
Earlier at the conference, Chief Operating Officer, Purple Proptech Limited, Ope Adetiba, had hinted on the plan by Purple to introduce home ownership arrangement by way of Fractions. According to him, Fractions solves the issue of access on the buyer and seller side and provides a level-playing field as well as gives an easier path to exiting real estate transactions.
As part of the plan under the Fractions model, Adetiba revealed, Purple would be launching home ownership scheme with over N30 billion worth of properties listed.
He listed advantages of Fractions to include “improved liquidity; direct access to marketplace with real time updates; optimised to run a digital IPO; fully integrated to allow you focus; and manage corporate actions.”
Speaking along the same line, Chief Executive Officer, Lifecard International Investment, Grace Ofure, while emphasising on the importance of co-investment, in her presentation, pointed out that, with co-investment, there were opportunities to take advantage of affordable investment amounts, higher returns on investment, and management flexibility, among others.
“Affordable investment amounts: Co-investing levels, the real estate investment for all, by providing small and average-sized investors the opportunity to penetrate the world of property investment.
“Higher returns on investment: Co-investing in real estate follows the low capital, high return pattern. Co-investors in commercial real estate can secure higher returns on investment with the limited capital resources they have.
“Management flexibility: The day-to-day operations and management of a property you co-invest in, would be handled by the primary investors and the co-investors alike. The primary investors are more experienced in property management.
Ofure advised that a discerning investor should keep abreast of opportunities in the real estate sector. “You need to be aware of the goldmine in real estate investment and own a fraction of the $7.3billion pumped into the Nigerian real estate market,” she noted.
